Business Assignment: The British Petroleum Company

The British Petroleum Company
Name
Institutional affiliation
The British Petroleum Company
Introduction
The company can trace its origins to 1909 when it was founded under the name Anglo-Persian Oil Company (Turner, 1983). It was not until 1935 that it changed the name to Burma Oil Company with the intention of exploring the discoveries of oil in Iran. In 1954 it changed its name for the final time to British Petroleum Company ("Book Review: The History of the British Petroleum Company Volume 2. The Anglo-Iranian Years, 1928–1954The History of the British Petroleum Company Volume 2. The Anglo-Iranian Years, 1928–1954BambergJ.H.Cambridge University Press, 1994639 pages £50ISBN 0521 259 509", 2014).
Background
It was the first oil organization to discover oil in the North Sea. The company has 83,000 employees from 2013 and has been involved in some of the major environmental disasters in history ("BRITISH PETROLEUM COMPANY LIMITEDV.EUROPEAN PETROLEUM DISTRIBUTORS LIMITED", 2008). One example is the Texas oil refinery which exploded in 2005 causing a lot of damage and chaos. The second one is the Deepwater Horizon oil spill that took place in the year 2010. It was the largest spillage of oil into the marine water and over the years has resulted in a lot of environmental consequences. The company was officially formed in 1998 as a major between British Petroleum Company and Amoco Corporation to form BP plc (Wilkins, & Bamberg, 2015). It is the third largest producer of oil and oil products in the world operating in more than 72 countries. It was initially incorporated as an oil and gas company on April 1909.
The analysis of the company
Products and services
It has three major segments which include upstream, downstream and Rosneft. Each segment is assigned a different task, for instance, the upstream segment which is involved in the exploration of natural gas and oil, the development of the field and production together with midstream transportation, processing, and storage. The downstream segment is tasked with the global manufacturing and marketing of products (Michelon, 2013). The Rosneft segment contains hydrocarbons both onshore and offshore. The upstream segment is obligated the duty of marketing and trading of natural gas together with liquefied natural gas (LNG) and power and natural gas liquids (NGLs). The natural gas and oil production assets owned by the company are located both onshore and offshore (Bamberg, 1995). The downstream segment is allocated the task of refining, marketing, manufacturing, transportation and the trading of crude oil and petroleum products alongside related services to retailers and wholesalers. It contains three segments each with a specific role. One is fuels which include refineries, convenience retail businesses, and other aspects that make up the fuels value chain (FVCs) (MOORE, 2009). The second one is lubricants, which manufactures and markets lubricants and other products related to the automotive, industrial and marine sectors. The third one is petrochemicals which are involved in the production and distribution of products produced mainly via technology. It also sells petroleum products. Rosneft has various assets in the hydrocarbon regions of Russia (Zhu, 2016). The organization engages in the sale of refined petroleum products in the form of gasoline, diesel and aviation fuel. The company additionally offers its licenses to other third party companies to use its technologies ("EQUIPMENT, PRODUCTS AND SERVICES LISTING & COMPANY DIRECTORY", 2007).
Pestle analysis
The best way to do a good external analysis on the UK market where the company operates is through looking at the pestle analysis of the region and looking to see if there is any that affects the organization (Gurney, & Company, 2005). First pestle stands for political, economic, social, technological, legal and environmental factors. Political levels include the level of government interference with the economy. Political factors include matters for instance tax policies, trade restrictions, trade law, tariffs and political stability. Since in the UK there is political stability it is correct to stay that the organization has a good working environment. May believe that it is the sole reason that it has its headquarters located in London. It is important to note that the government has a lot of influence in the business sector and an unstable government can interfere with business for instance by constantly raising taxes and developing stricter laws. Economic factors include the rate of inflation and interest rates. These are some of the issue that my affect the company. For example the rate of inflation can lead to the company registering losses since the production cost will become expensive. Statics indicate that the firm is on the verge of changing its managerial structure as it is global and tactics in the market have changed. As of 2015 the organization managed to change its managerial structure whereby each manager is allocated their own continent.
Social cultural factors include the culture of the surrounding community as well as that of the company. Technological factors include the rate at which technology is changing and evolving. Environmental factors include how the organization affects the environment, but it has not affected the environment in the UK. It has done so in other countries where it operates. The British people have a large purchasing power and due to technological advancements in the country the people have the capability to purchase products from the company. Despite popular opinion the organization recorded increased sales and this has been mostly attributed to their heavy awareness campaign on the creation of a stronger brand.
Legal factors have to do with the laws of the country where the organization operates. Some countries have strict laws against foreign companies, and this contributes to the withdrawal of the firms. The company ensures that it respects the laws of the companies that it operates in. In an overview, the oil industry in the UK is suitable for the operations of BP. Forinstance due to an increase in the awareness for the importance of looking after the environment, the UK has tightened laws that restrict pollution. In some cases the laws may restrict the company from operations. As for the financial performance the organization currently indicated losses in 2015 due to the sudden fall in oil prices globally.
Financial performance
The company has accredited itself to caring more for the value compared to volume. Globally economic growth has been slow and even slower on non-OECD organizations (Fontenot, 2017). Within the US and the UK, non-OECD companies performed the best recording a medium-term growth in the year 2014. The main competitor of the organization is the shell company which is the fourth largest producer and distributor of petroleum and other petroleum associated products worldwide. The full underlying replacement profit cost in 2014 was $12.1 billion compared to $13.4 billion recorded the previous year. The gross profit of the organization back in 2014 was $38.59 billion. The formulae for getting the gross profit ratio is dividing the gross profit by the net sales. According to the company website, the net sales for the year 2014 were $3.2 billion. This divided with the gross profit results to a ratio of 3.2%. This shows an evident drop from the previous year when the company made more profits. The major competitor shell also registered a drop in the underlying replacement profit cost whereby it reduced from 15.15% in 2014 from 15.44% in the previous year 2013(Michelon, 2013). This was due to the rapid drop in oil prices that began mid-2014 when more oil was discovered worldwide. This led to a drop in global prices, and this affected many companies that had poured funds into another project while expecting the same return as in the previous years. This also affected return on investments as the new prices could not accommodate the funds already spent on other projects maybe the expansion to new areas. As for shell, the ratio reduced to 8.65% in 2014 from 9.09% recorded in 2013. This shows that the company was not able to compensate investors and the stock prices dropped as a result (Schaefer, 2015). The same happened for BP, but it was not badly affected as the stock prices remained constant.
Recommendations
The success of any organization highly depends on the organization structure and the culture of the company. Some companies have bad cultures that employees are always looking for a way out. The structure of management is very important since it through it that instructions are passed down to the employees. A company that is con...